An Evesham homeowner emailed me last week, following my article posted in the Evesham Property Blog about the change in attitude to renting by the youngsters of Evesham and how they thought it was too expensive for first time buyers to buy in Evesham. Buy to let landlords have played their part in driving up property values in Evesham (and the UK) and they have made housing a lot less affordable for the 20 and 30 somethings of Evesham.
In the email, they said they thought the plight of the first-time buyers in Evesham was like a novice tennis player, playing tennis with Andy Murray. If you played him once you will unquestionably lose and if you were to play him 100 times you would lose 100 times. That is what they thought it was like for all the 20 something first time buyers of Evesham going against buy to let landlords.
They went on to ask if the Bank of England (BoE) should be tasked to control house price inflation in the same way as the BoE controls inflation. The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the governments’ economic policy, including its objectives for growth and employment. So, should BoE be charged with containing buy to let market, possibly by changing rules on loan-to-value (LTV) ratio’s?
The best measure of housing affordability is the ratio of Evesham Property Prices to Average Evesham Wages, (the higher the ratio, the less affordable properties are). In 2014, the average value of an Evesham property increased to 9.04 times higher than the average annual wage in Evesham.
This deterioration in affordability of property in Evesham over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buying their own home, but it’s not the only reason.
A quick search on MoneySupermarket found 169 lenders prepared to offer 75% LTV buy-to-let mortgages and none at 85% LTV. Lenders have self-imposed a high level of entry for buy to let landlords (i.e. putting down at least 25% of the purchase price in cash). The BoE don’t need to meddle there! Also, the Conservatives have certainly done lots to level the playing field in favour of first time buyers. For nearly a year now, landlords have had to pay an additional 3% in stamp duty on any buy-to-let purchase and over the coming four years, tax rules on landlords claiming mortgage interest relief will hit their pockets. However, it didn’t help that the local Authority sold off council houses in the Thatcher years (without replacing them) and so for many on low incomes or with little capital, owning a home has simply never been a realistic option.
It’s easy to look at the headlines and blame landlords. However, first time buyers have been able to access 95% LTV mortgages since 2010, meaning even today, a first-time buyer could purchase a 2-bed terraced house in Evesham for around £160,000 and only need to find £8,000 deposit. Yes, a lot of money, but first time buyers need to decide what is most important to them. After all, it is still possible to save up for a couple of years towards a deposit, by going without two annual foreign holidays, the full satellite/ cable TV package, the latest mobile phone and sacrificing some socialising.
Our country is changing. Renting is becoming the norm again. In my opinion, landlords now have it tougher than ever before. Let’s not blame them for the ‘perceived’ woes of the nation, because to be frank we haven’t always been a country of homeowners. Roll the clock back to 1964, and 30% of people rented their home from a private landlord – today – its only 15.3% nationally.
If you are an existing landlord or you’re thinking about becoming a first-time landlord and are looking for advice and opinion and what (or what not to buy in Worcestershire), feel free to contact me. I’ll have the kettle on ready!